Centralized or Decentralized Fulfillment?  

A centralized or decentralized fulfillment approach is an increasingly important decision for brands who are seeking to meet customer demand for speed and convenience. The ability for brands to fulfill customer needs across multiple digital and physical touchpoints has never been more important. Omnichannel offerings are now the standard for any brand operating across online and offline realms. This is amplified by a growing consumer need for speed, convenience, and sustainable delivery options, with brands like John Lewis responding to such demands with the extension of its same-day delivery service for online shoppers.

The power of omnichannel as eCommerce evolves

Omnichannel strategy creates a consistent brand experience through different channels like a storefront, website, social media, etc. Integrated platforms synchronize stock between eCommerce and stores, helping resolve supply issues regardless of the source.

Omnichannel capabilities are necessary to meet complex consumer requirements, driving platforms to innovate for customer loyalty. Mobile commerce is rapidly catching up with eCommerce, with Buy Now Pay Later (BNPL) models increasingly used to offer flexible payment options and boost conversion rates. Brands adopting this approach showcase agility and customer focus, helping them overcome financial challenges for the many customers impacted by inflation and cost-of-living crises.

In the same sense, social commerce as a shopping platform has helped accelerate changes in consumer behavior. This is something that brands need to acknowledge and keep up with. In many cases, a third-party fulfillment provider is required to support these evolving expectations. Brands are now trying to mimic the offline world through their online offer to reduce any gaps in the shopping experience. This includes utilizing developments in augmented reality to bridge the gap between offline and online shopping experiences.

Decentralized vs centralized – how brands can benefit

Creating the best omnichannel experience relies heavily on how operations function, whether that’s through a centralized or decentralized distribution center (DC). When looking at traditional centralized fulfillment, it’s important to remember it offers distinct advantages, with simplification being the driving force. This method simplifies inventory planning and sorting through a single fulfillment model and stockpile, providing accurate data for predicting consumer changes and external factors. One single inventory stock pile also helps reduce operational costs – an attractive proposition for small retailers with low order volumes. 

On the other side of the coin, de-centralizing operations through multi-node order fulfillment can enable brands and retailers to spread inventory across regions. This, in turn, allows them to offer more delivery options by optimizing inventory across channels and shortening the distance for last-mile delivery.

Distributed Order Management (DOM) technology allows retailers to route orders across various fulfillment points, based on factors like delivery preference, shipping time, cost, and inventory optimization. This enables alternative delivery methods like curbside pickup, BOPIS, and ship-from-store, ensuring business continuity in unforeseen circumstances.

Geography is another consideration. Decentralized operations offer resilience, cost-efficiency, and agility in meeting customer needs for cross-border opportunities. Brands will have challenges and rely on freight capabilities that are specialized in managing cross-border shipments. When working with a centralized model, tax matters and localized options need to be considered. 

To win customer loyalty in today’s competitive retail market, brands must offer unique capabilities. Centralized and decentralized both have their place but support very different needs.  Ultimately, to balance these considerations and strategize for every eventuality, an experienced partner is required. 

The perfect match – picking the right partner for your fulfillment model

For brands to accurately meet the needs of their customer, securing the right fulfillment partner who can guide them to the best fulfillment model for their needs and then deliver that solution is critical.  The chosen partner should be able to help them strategize to support forecasts with the optimal mix of scalability and technology, as well as the ability to be nimble as brands pivot to the needs of the market and customer base.

eCommerce is ever-changing. Brands must experiment with new strategies to keep up, retain customers, and grow. A 3PL partner must be flexible to adapt to the brand’s needs and help the business support customer demands year-round. Brands should continuously improve their operations by understanding and implementing the right strategies for fulfillment and delivery – with the ultimate goal of getting ahead of the game to appeal to customers.